Q1 2021 Vinci Partners Investments Ltd Earnings Call
[music].
Good afternoon, and welcome to the Vinci Partners first quarter 2021 earnings conference call at this time all participants.
Are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time as a reminder, this call will be recorded I would now like to turn the conference over to Ana Castro Investor Relations manager. Please go ahead.
Thank you and good afternoon, everyone. Joining today are Alessandro Austin, Chief Executive Officer, goodness that Amber head of private equity and Investor Relations and Sascha <unk> Chief Financial Officer.
Today, we issued a press release slide presentation, and our financial statements for the quarter, which are available on our website at IR that Ctrip partners dotcom.
I'd like to remind you that today's call may include forward looking statements, which are uncertain and outside of the firm's control and may differ from actual results materially.
We do not undertake any duty to update these statements for a discussion of some of the risks that could affect results. Please see the risk factors section of our twin yes.
We will also refer to certain non-GAAP measures and you'll find reconciliations in the release.
Also note that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase an interest in anything to parking spot.
With that I'll turn the call over to Alison.
Thank you Anna good afternoon, and thank you all for joining our call.
This was the first quarter for Vinci partners as a public company. After our IPO earlier. This year, we were able to generate very strong results as we continued to deliver solid returns for our fund investors.
Nonetheless, the current market valuation of our stock in our view does not represent the actual value of our platform our existing investments in our very significant growth opportunities across the firm.
So in addition to announcing our quarterly results. We are also initiation.
Share repurchase program of up to 85 million Reais, which has been approved by our board of directors.
We are committed to delivering shareholder value and this buyback program outdoor relation reflects the board's confidence in our current prospects and long term growth. We believe that this program represents a creative opportunity to deploy cash from our results in a way that should bear.
Our shareholders Bruno will discuss the ref broaches plan in more detail in a few moments.
Onto our financial results Vinci partners reported excellent results for the quarters with Ifr Ias net income of 47 million Reais fee related earnings of 50 million Reais or 88 cents per share and distributable earnings of 47 million.
Ice or 83 cents per share.
Our business is profitable and growing with a strong operating leverage long term FRE and distributable earnings margins continue to expand in a relative fixed costs over a wham decreasing year after year.
We ended the quarter with 55 billions re ice in a wham, which represents 45% growth year over year.
Our very expressive growth.
Growth. This quarter was a result of primarily 2 factors.
First we have probably 1 of our best quarters for fund raising in private market strategies.
We raised almost 2 beta re I flew 5 different fund Raisings off which you are new strategies. We are very excited about in the real estate and infrastructure segments for which we will continue to raise capital throughout the year.
We also had the final closing for private equity impact Fockers Fund V. G impact in return for <unk> or <unk> for that reach a defined its hard cap of 1 billion reais in the quarter, making it the largest impact oriented fund in.
And Brazil.
<unk> 4 is extremely relevant to vinci in 2 different levels. This fund raise represents 1 billion reais of additional long term high quality capital for our private market strategies in that new Avenue of growth inside the firm.
Additionally, PRA for marks an important milestones we've seen vinci ESG efforts since our company's inception, we were very cautious about the adoption of responsible investment and ESG integration you know investment decision process being a P. R. I C.
You cannot draw it seems 2012, and we remain 1 of the few alternative asset managers in Brazil, with an impact oriented private market strategy and an active ESG committee within our board, which really set us apart from competition.
Another very important Avenue of AUM growth was our I P. N S business debt raise at over 3 billion re ice during the first quarter of 2021.
We have been very active in fund raising for new separate mandates for institutional clients for which we provide allocation service ranging from specific mandate in predetermine asset classes or even the client's entire portfolio.
We continue to see a very material opportunity for growth in this business and we still face very local petition in Brazil for this type of service.
This quarter's fund raising is a clear result of the power of our brand in Brazil of how we can launch new strategies and raised long term capital. We just started a new branding project that will take place throughout the year with 1 of the most respected marketing agencies in bridge.
Are you looking to increase brand awareness, especially among retail investors.
The retail channels that we access through our locators and distributors and our public market vehicles have been growing at a very accelerated pace, representing currently 20% of our AUM.
We took on this project looking to improve our communication with this type of investor expanding our distribution capacity and reaffirming our position at the top of mind brand for attractive investments.
Moving on to our view regarding the local macro scenario, we believe that despite some recent volatility Brazil continues to be an extremely healthy and supporting the environment for growth in Delta active asset management industry.
We have been impacted in this first quarter by a second wave of COVID-19 cases in Brazil, but COVID-19 vaccinations have be accelerating as the priority group, which include Citron of 60, plus years and Audrey special situations should be fully vaccinated.
With both shots in a couple more months.
The population in the state and municipal governments have adapted to the pandemic, which allowed the economy to be less impacted in this second wave when compared to the first wave in 2020. Furthermore, new Covid cases had been improving markedly over.
For the past few weeks and the restrictions rolled out during the month of March are starting to be ease it back.
As for interest rates as you can see in this short displayed in slide 6 long term real interest rates continue to be at low historical levels at the current 4% rate we continue to hover at flow.
Level of debt.
At all time lows and this continues to drive reallocation in local assets from fixed income into alternative asset management class.
What we're seeing now is really a transformation moment for us in our industry that has developed into a financial deepening resolution for all types of investors.
Even with the expected rise in short term rates starting to take place. We believe that at this current levels. The scenario continues to be quiet constructive as institutionally vascular I still way below their actuarial targets and need to seek alternatives to for diversification.
In their asset bases to improve yields in the portfolio.
This is also true for individuals who are facing negative after tax short term real rates and negligible longterm real rates, we have not seen any change in the decision making process of Disney vascular so far and we continue to benefit from local trends as our.
AUM continues to grow at a very rapid pace and Vinci continues to gain market share.
And our lives macro asset allocation figures, Brazil, a wham has more than doubled in the last 5 years and we are seeing a significant change in the vessel profile with asset allocation moving away from fixed income into larger investment classes.
Even with an 11 percentage point decrease in relative allocation seems 2015 fixed income is still represents the biggest proportion of Brazilian capped allocation, leaving great room for growth in alternative investments.
Allocation to assets, excluding fixed income in Brazil has been growing at a 21% CAGR since 2018, as we see the direct effects of the financial deepening Revolution, taking place locally.
A comparison.
AUM has been growing at a 41% CAGR in this same period, we first quarter 2021 year over year growth accelerating from that already high rate of growth. We believe we have been very successful in growing our business over the years growing our market share.
In all investment classes, and we believe there is yet great room to grow within this large addressable market that's still in fixed income products.
We believe we are only in the beginning of the shift of capital flows from fixed income towards alternative and Vinci partners is the only Brazilian asset manager that has expertise in all the key alternative asset classes, which put us in a unique position to capture.
This movement in asset allocation.
In addition to local trends, we also have access to a global capital pool that is currently substantially underway in Brazil in our opinion currently offshore institutional investors represent roughly 25% of our AUM and we see room for this fund.
Raising vertical to grow.
The combination of presenting a complete alternative asset management offering sound governance, and institutionalization and strong risk adjusted returns in our products puts vinci in a privileged position to be the partner of choice for offshore investor.
Looking to deploy capital in Brazil.
We are confident that we have the tools to seize Disney mass opportunity. We see currently in Brazil, as we continue to provide the best returns and investment opportunities for our limited partners, which translate into results for our fellow shareholders.
And with that I'll turn it over to Bruno.
Thank you Alessandro and good afternoon, everyone.
On slide 8 we will walk through some of the financial highlights for the quarter.
Steel related earnings were $50.2 million Reais for the first quarter or <unk> 88 cents per share a 13% increase year over year and 157 million over the last 12 months up 25% year over year.
Vinci generated distributable earnings of $47.2 million reais in the quarter or 83 cents per share up 41% year over year and $139.8 million over the last 12 months up 17% year over year.
As I just mentioned total AUM reached 55 billion Reais as of the end of the first quarter, an increase of 45% on a year over year basis.
Our fee, earning AUM ended the quarter at 52 billion Reais grow even faster up 48% year over year with much of its related to the private market capital subscriptions and that inflow seen across our IP in that business.
Performance fee eligible AUM totaled 35 beanery is at the end of the quarter and represented nearly 70% of our total fee, earning AUM.
Let me now touch on the rationale and details for the share repurchase program, we announced today.
We are long term believers in our business and continue to be focused on how to further strengthen its our desire is to continue building our shareholder base and our presence in the market as a public company.
In addition, all partners are and will continue to be shareholders of the firm for the long term given the Lockups agreed upon during the IPO process.
We're fully aligned with other shareholders to generate returns while investing in vitro partners stock.
<unk> platform is diversified and presents many different growth avenues, we have grown our company against a backdrop of cyclical market volatility in Brazil since our foundation in 2009 and have been able to demonstrate its resiliency overtime.
Some information before we have not seen any relevant change in the current market scenario that could justify our opportunity being any different than a few months ago and the acceleration of our AUM growth in the first quarter of 'twenty, 1 is a testimony to that.
Finally, our business model has a unique combination of growth with notable trends in local asset migration towards our product offering in addition to substantial opportunity to further grow our already relevant international clients footprints visibility with substantial amount of our effort.
<unk> coming from long term locked up capital performance the upside as we currently have approximately 7 billion reais of private market strategy funds that are maturing and could generate substantial PRA in coming years.
And having all of those positive characteristics, while also generating substantial amounts of free cash flow.
Therefore, we have decided to implement the repurchase program of up to 85 million Reais as we believe this repurchase will be substantially accretive to long term shareholder value.
We will finance the buyback program with cash balances derived from our Super Warranties, which is not expected to have a mature impact on capital levels and should also be in accordance with our previously announced policy of semiannual dividend distributions off at least 75% of the shift towards.
Yes.
We expect to buyback capital to come from the unallocated portion of artist suite, the warranties and effectively allow us to return 100% of our free cash flow generation to shareholders during the program.
Moving on in Slide 10, we present, the AUM roll forwards for the quarter.
We had inflows of $4.2 billion reais in the quarter across our liquid strategy and DNS.
DNS businesses.
These include 1 point for a beat and that proceeds from the IPO and $2.9 beat any flows from Ike DNS and our hedge funds segments.
Outflows totaled $2.1 billion reais in the quarters of which $1.1 billion, our formal withdrawal of a sovereign wealth fund exclusive mandates that does not pay management fees.
More than half of the quarter's outflows do not represent the relevant impact to our management fee revenues.
This outflow is a renovation of gains achieved by a tactical allocation made by this institutional investors in the public equity segment when the Brazilian stock market reached record low levels. During the COVID-19 pandemic last year. This.
This mandate still represents a rather than part of our equities AUM and at this time, we do not expect any audrey significant outflow.
<unk> also benefited from almost 1 billion reais in appreciation during the quarter, primarily from our private markets funds.
I would like to go into more detail regarding fund raising for our private market strategies.
As we show in spite of 11. This was a remarkable quarter for fund raising in our illiquid strategies, we raised almost almost 2 billion reais in our private equity real estate and infrastructure segments, which is an outstanding result for just 1 quarter and reinforces the strength of each of partners brand and fundraising efforts for private markets.
Strategy in Brazil, all the products, we put out in the quarter had very successful capital raises with most of them being oversubscribed.
This represents almost 2 billion of additional very high quality capital with long term to perpetual lockups that translate into management and potential performance fees for Vinci.
We have been raising var for over the past year and during the quarter. The fund reached its hard cap of becoming the largest impact private equity fund in Brazil, with 1 billion Reais in commitments.
We also carried out 2 follow on offerings in our listed funds strategies with V. I L. E. N V. IGT that together represented almost 1 billion reais of additional perpetual capital. We expect to continue to have opportunities to raise capital for a perpetual vehicles throughout 2021.
Finally, we launched 2 new strategies V F D L envious for which we intend to raise an additional 1 billion reais combined until year end 2021.
Moving onto slide 12, we can see that the platform continues to display positive AUM growth against the same year ago period across all segments.
1 key point to highlight is the growth in our long term AUM that includes funds with lockup periods of at least 5 years to quasi perpetual funds. This grew by 43% year over year and currently represents approximately half of our total AUM base.
Our perpetual capital AUM more than doubled in just 1 year, primarily due to the success of our at least its fund strategy and currently represents 25% of long term AUM.
Furthermore, our <unk> remains broadly diversified by duration asset class and distribution channel as is shown on slide 13.
45% of our net revenues were sourced from private market strategies with management fees typically based on long term capital commitments, thereby mitigating a redemption and mark to market risk.
In terms of distribution local and offshore institutional clients accounts for about 60% of our AUM with the remaining 40% well balanced across high net worth individuals and our high growing retail dedicated distribution channels, allocators and distributors and our public market vehicles.
Turning to slide 14, we wanted to give a little bit more detail on how our performance a wham is distributed across the platform and the different ways, we charge fees.
Our performance fee eligible AUM currently totals 35, <unk> or 70% of our fee, earning AUM.
2 thirds of this a wham is currently generating performance fees.
This includes mostly our liquid strategy funds and IP N S abuses.
And some private markets funds during divestment period.
Most of the funds in liquid strategies and I P. N S charge performance fees based on the funds returns over their hurdle rate, our benchmark with a high watermark clots.
This is an exception for a sovereign wealth fund mandates, which represents about 5 <unk> of our equities business AUM at the end of the quarter and that can charge performance fees, regardless of market performance. It is a pure alpha mandates with no high watermark feature.
Within our private market strategies about 7 being array is in a wham comes from preferred return type funds with carried interest there are still in investment periods.
We raised about 10 being a rising private market strategies over the last 5 years. So most of this new AUM is still maturing.
And they will be able to charge performance fees as they return capital to investors in the coming years.
To put this potentially context, our latest flagship private equity funds Vinci capital partners. III is currently marked at over 47% IRR in Reais and 25% IRR in dollars, which bodes extremely well for future potential performance fee regulation there.
Strong optionality in the platform coming from potential future realization of performance fees.
Finally, we have some private markets funds that should contribute to realized performance in the short term as is the case for infrastructure private equity style funds fight the infra for which we have booked in our balance sheet unrealized performance of 28 million Reais.
For this fund we also have a total GP meets with endpoint investments that is currently markets fair value or $28.3 million Reais. So when the performance is realized you should also impact our G. P vestment income positively.
We expect the realization of F <unk> for it to take place in 'twenty or 'twenty 1.
Our performance recognition is very conservative.
As we book an unrealized performance in our private markets funds, only where there's a very high probability for a reserve where organization off that performs as is currently the case of this infrastructure funds at.
At the end of the presentation you can find investment track records for all of our flagship funds in private markets liquid strategies and IP N S.
With that I'll turn it over to Seth.
Thank you Bruno.
In slide 15, we can see that our fee related revenues continue to expand.
Alongside AUM growth.
Management and advisory fees were 97 million higher in the quarter Hippert Xynthia, an increase of 23% year over year.
Management fees, having been the main contributor to revenues accounting for almost 80% of total net revenues over the last 12 months and have grown 30% year over year.
As you haven't mentioned in our 20-F and during our IPO process management fee revenues during 2019 or benefit Bannister, our originated revenue recognition coming from the management see catch up charge. It on Alaska clauses offer VC Petrie.
This was fully charged off during the first and second quarter of 2019 and not through the fund raising periods of UCP 3.
This affects the base of our first quarter of 'twenty, 2 annular west wherever moms numbers favorably.
We are showing 19% growth over the last 12 months of the first quarter 2020 of them are against the prior year period on that and that just had babies, but I just think for the visa B III.
Catch up revenue this growth would have been a much higher.
31% figure.
The main reason for this growth rate was growth in fee pay a O M.
In slide 16, we give a little more detail regarding our expenses for their product.
Other expenses had an increase of 52% year over year during the first quarter to anyone.
This is primarily due to new recurring costs related to becoming a public company totaling about $3.3 million of highs.
These new Cros can be segregating 3 categories, the first and most relevant representing 40% of new recurring costs related to becoming a public company.
Third party service providers food, such as editor at Sophie's, NASDAQ listing fees and others.
Additionally, as a public company, we had to make some adjustments in that structure.
We had new members of our board of Directors and we also had to make some new addition, and our support teams like the shareholder relations team and additional people for financial reporting.
That's the last as we stated in our F..1 during our IPO process, we adjusted the company's compensation structure for our regular G&A compensation style after that pool, which impacted personnel costs.
So when you look at our expenses line bonus related to management and advisory fees grew at 25% rate year over year in line with growth seen in fee related revenues performance compensation is directly linked to performance revenues, so I'm going to have a quarter with a bigger country.
Bruce him from before on Us with.
Should see bigger compensation Roswell.
We also had an additional $1.6 million expanse in deepwater related to our new branding project that or there's no mention in the beginning of our call targeted mainly towards our retail dedicated distribution channels.
Can you say to dispose of during the quarter and it should take place throughout the year.
Both are new public company costs, and onetime strategic branding effort, we will present headwinds for a stronger margin gains. This year, although we do expect to be able to grow FRE margins in 2021 versus last year. Despite these effects if at current AUM growth.
Rents continue.
An additional comment our board of directors just approved a stock compensation plan, representing 5% of the company's total stock.
On this first ranch, we will allocate approximately 2.8% of the shares for employees that the range.
Strike off $18 per share at the Companys IPO price.
This plant will take place 3 years from our IPO date.
1 year maximum deadline for full exercise.
Turning to slide 17, we present, our fee related earnings FRE was 50 point Schuman of highs are 88 cents per share represent an increase of 13 year over year.
Over the last 12 months F. R. E was 157 million and here is an increase of 25% year over year, it should be even greater considering the catch up effect from BCP III in private equity.
<unk> continues to be the core indicators of our business as management fees continue to grow alongside our strong fundraising.
And therefore your bridge chart, we present, a breakdown of the fee related revenues and expenses disregarding additional costs for the quarter are compatible FRE margin would have been 6.7% 5 percentage points higher than our fee margin for the quarter of 52%.
And 50 basis points higher than I thought he monitoring for their first acquired it's rented training, which was positively impacted by lower than usual third party expenses.
In slide 32 in the presentation with the appendix, we break down our expenses for the quarter in comparison to the same period last year.
For the full year 'twenty train FRE margins reached 55% as is a deep core product was normalized throughout the remainder of the year.
Next in Slide 18, Yeah. He was $6.7 million it has in the quarter most of it coming from our international I've been asked to business.
Was up $9, 2 and a half year over year.
This increase was primarily due to a bigger contribution from performance fees and I I'd be N S abuses in the first quarter of 'twenty, depending on <unk>.
Additionally, in the first Corrado of 'twenty 'twenty was impacted by a reversal effect things, we had pro vision performance fee as negative unrealized performance in their quota.
During the last 12 months.
Are you a statistic to me and he is up 2% year over year. It is important to mention that our theory has a seasonal effect things most of our liquid funds charge bear pharma semiannually, usually in the second and fourth quarters of the year.
Next thing in Slide 19, we present results from our GP commitments in private market funds.
We broke down the exposure and the results between hours, you're being investment income, which reflects the returns of capital allocated to our elite defense and.
Financial income, which is the result of our leak at their locations.
Total portfolio returns reached $5.6 million of Hey, I was in the quarter heparin Xanthe, an increase of 536% year over year as we had a relevant increase in financial income due to the impact from the deployment of the IPO proceeds.
As discussed in our last call. We designed I leave the portfolio to allocate our balance sheet capital until resource are called into our elite. The funds. The sports volume was designed for attack return of CDI plus 2 per year.
While also display low volatility.
Given the market volatility quarter, we allocated the IPO proceeds conservatively. Therefore at the end of the quarter, we still had about 8.2% of our cash allocated in fixed income.
<unk>.
Since the end of the quarter as we saw markets, you're starting to recover we accelerated cash deployment towards the target portfolio.
In terms of returns we presented the quality of track records of the proposal started to look at the purchase volume for the last 24 months on a quarterly basis.
We do expect.
To see some minor volatility in the financial income throughout the quarters as you can see in the back test will have some quarters better than the others, but in the long term, we expect to achieve returns at our targets of CDI plus 2% per year for the liquid portfolio location.
Turning to slide 20 distributable earnings.
$47.2 million hasn't there quarter or 83 cents per share represent an increase of 41% year over year.
Over the last 12 months distributable earnings totaled 140 million highs are true <unk> 46 per share.
Finally, slide 21 shows our cash and investment balance.
We finished the first quarter of 2021 with a total of $1.45 had been on the highs in cash and investments are 25.30.
<unk> 39 per share.
Today, our cash investment balance are comprised primarily by fixed income and liquid funds, although we expect to be gradually she fits into private markets GP funds investments S kept our commitments are called in the coming years.
As shown in the appendix we ended the first quarter of 2021 with total GP commitments of 179 million in the eyes of which 24 million them hasnt been called and that currently valued at approximately 40 million highs.
With that I will turn the call back to balloon.
Thank you Sasha.
Turning to our segment highlights and we have stated.
In our latest earnings conference call, we will start presenting this quarter FRE Fury and segment distributable earnings for each of our segments.
As you can see in slide 23, almost 50% of our FRE and segment just seem to where earnings come from our private market strategies, followed by a 20% contribution from liquid strategies, both in our FRE and segments D.
Our I P. N S business represents 13% of FRE and 21% of our segment distributable earnings as in this quarter. It had a bigger contribution on realized performance revenues finally, our financial advisory business accounted for 18% of FRE and 16% of segment distributable earnings in.
Quarter.
Moving on to each of the segments, starting with our private market strategies on slide 24.
FRE and segment distributable earnings were up 14% year over year due to the growth in <unk>, we have seen over the year with highlights from our fund raises in our listed vehicles in real estate and infrastructure. The final closing of VR for in private equity and the first closings over to new store.
<unk> D L envious.
Our private market strategies still have great room to grow, especially across new strategies, we are launching over the year such as our new listed REIT that is currently going through an IPO process in the Brazilian stock market.
We have also signed a joint venture recently for our new strategy in the agribusiness sector, which will be co managed by our real estate and credit segments. Therefore, all around great opportunities to continue to grow our business.
We are seeing great deal, making activity and our funds are private equity impact funds via our 4 has already deployed about 10% of its committed capital N V. I D. C are listed infrastructure fund fully deployed the proceeds raised in its latest fund raising this year and already has a pipeline.
Line of potential assets that can lead to a follow on offering for the funds.
Liquid strategies FRE was up 12% year over year as you can see in slide 25, while segment distributable earnings were up 20% year over year due to a bigger contribution outperformance sees in the quarter compared to the first quarter of 2020 that had booked about.
1 media is an unrealized performance.
Fee paying AUM grew at a 40% rate year over year with a significant portion coming from the sovereign wealth fund mandates that does not pay management fees, we mentioned earlier on the call.
Because of this effect the average management fee rate decreased 7 basis points year over year.
Over the next quarters. This effect will be lapped and we should also see a positive effect on the average management fee rates coming from the end of the revenue sharing agreement with Ghazi visiting the ounces that happened at the end of last year.
Moving onto our I P. N S business on slide 26, 8 O M. Almost doubled since the first quarter of 2020, which translated into FRE growth of 71%.
This quarter the IP N S. Offshore mandates were the main contributors to realized performance revenues bring your I P. N Aspira <unk>, 2.5 million Reais, which translated into 183% growth in segment just shipped to grow earnings year over year.
Finally in slide 27, we can see advisory revenues for our financial Advisory business, which is mostly in line with the same quarter the year before.
In this quarter, we acted as an exclusive advisor to sponsor laser and its shareholders in its initial public offering in the Brazilian stock market, our B III.
The company was the first beauty service company to publicly listed shares in the Brazilian stock market.
With that we thank you all for joining the call and I would like to open it for questions operator.
As a reminder to ask a question you will need to press star 1 on your telephone again Thats Star 1 on your Touchtone telephone to ask a question to withdraw your question press the pound key.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Tito.
Nevada of Goldman Sachs. Your line is open.
Hi, Good evening, everyone. Thank you for the call and taking my question a couple of questions first maybe if you can give an update on how you're seeing the fund raising continue into <unk> so far.
In April and May give any color on that and second question in terms of.
Yeah from a margin and you highlighted some additional expenses you're incurring but how should we think about that FRE margin going forward, particularly as you continue to grow and gain scale do you think that can expand this year.
Or any color you can give on sort of the evolution of that ethylene margins going forward. Thank you.
Yeah.
Hi, Tito this is Sandra thank you for attending I'll call.
Taking your first question about the fund raising.
<unk>, we are seeing pretty much the same trends that we saw on the last quarter. So we believe that we continue to see a very strong trend both from the private market side and this comprises all the different I would say.
Private market strategies private equity real estate.
Infrastructure and also.
Our private credit.
And also very very strong activity and we are gaining a lot of different mandates and competing for others in our Ips division. So we are seeing pretty much the same trends.
Especially strong in private markets as a whole and in IP N S talking about the FRE margin.
To your point, we continue to see the trends of.
The FRE margins keep growing as we gather more AUM of course SaaS explained during the call. We had some FX. This quarter. That's the cost that we had to incur related to being a public company, but going forward of course that will be <unk>.
No new.
Our situation because it will be a public company going forward, but we'll continue to have an improvement that we expect over time.
Margin due to the gains of AUM.
Thanks, Alessandro that's very clear maybe just a couple of follow ups. If I may just how about on the public equity side and then some.
Concerns.
Do you think that the outlook for the public equity side can improve on the fund raising and just to be clear on those additional expenses is this sort of like the new recurring level or do you see those continuing to grow.
Just to get a sense of how much of those are recurring expenses will impact go going forward Nymex Republic.
Okay.
I'll take the first question about the public equity fund raising and Bruno will talk a little bit about more detail about the expenses.
In terms of public equity, we are not see Andy.
Redemptions.
Important redemptions.
2 of course, the public markets have been a little bit more soft in terms of fund raising.
The first quarter as you saw taking out the redemption that came from the sovereign wealth funds that are booming explained but on average the core offering in public App has been very stable and growing slightly but not so strong like no. Other asset class. We have seen the same trend I feel now.
In this quarter.
So we will use you'll probably see the growth from new M coming more from private markets and IP N S.
Yeah.
Going to your question regarding the margins. So the there were 2.
2 effects that I would say in the first quarter.
<unk>.
Is that a new new recurring level of expenses that we're going to have.
That impacted our first quarter 2021 number so that will be the current the new level of expenses going forward. So if you look at second quarter third quarter.
We're only going to be able to lap that next year. Once we have a full year of expenses are coming from from public company costs and then the second point is that last year. The first quarter margin was seasonally very high so you remember that.
The year ended FRE margin was about 50%.
We are for the first quarter, we did close to 52.
And I think if the trends continue in the same direction.
We should be able to bolster low 50 type of FRE margin. So that's 50, 150% to 52% Oh EMS continuing in the right direction that should be more or less the level 4 for margins. This year right. So if the trends continue in the current base that they are.
Okay, Great. That's very clear thanks, everybody, we're not may not know Samsung.
Yeah.
Thank you again to ask a question. Please press star 1 on your Touchtone telephone and again Thats Star 1 on your Touchtone telephone to ask a question.
Our next question comes from the line of Mike Carrier of Bank of America. Your question. Please.
Hey, guys. This is dean Stephan on for Mike just given the announcement around the share buyback program can you just provide an update on your capital priorities moving forward and.
And how they may be split between buybacks the semiannual dividend that you mentioned potential.
Potential M&A opportunities as well as investments in the business.
And then related to that on the buyback side you expect this to be more of a 1 time authorization or do you do you expect to have a continual authorization moving forward. Thanks.
Okay. Thank you. So much this is Bruno again, so are we.
We we made a commitment.
Distributor as cash dividends at least 75% of our distributable earnings and we expect to continue.
To have that commitment.
But we did have flexibility regarding the the order of 25% right. So the idea was to too.
To take advantage of that access 25% now in the moment, where we still have a very large cash balance from the IPO, that's gonna be directed towards our most.
Mostly funny off new private market funds.
That is still on allocated right. So it's going to take a few years for us to allocate that fully so use that excess 25% of the civil earnings to buyback our stock right. So with the way that we've thought about this was too.
Look forward a few quarters in time.
In the amount of distributable earnings that we expected to boast.
And then back debt.
With that 25% to see what would be like a medium term buyback that we'll be able to support with our own free cash flow. So that's the plan for the current.
For the current program.
Once this program is exhausted we will.
Sit down again, everything what would be the destination of that access 25% of distributable earnings that we have that is unallocated today, so that could be either refresh into a new buyback program or eventually.
As dividends.
But that was more or less a lot of thoughts in regards to the buyback.
In regards to the odds are capital uses.
It really hasn't changed so we are.
Looking forward to deploying the capital on our public market funds. So if you look at the appendix today, we have about $175 million.
Of commitments.
$180 million of commitments to our private market funds.
So the idea is to continue to roll our rollout those commitments are at that leverage ratio that we mentioned.
IPO process using about 5% of GP commitment on the total size target size of the funds and obviously, we continue to look for.
M&A opportunities as well in the markets.
Trying to figure out if there's anything that might enhance the platform.
That also continues to be a potential use of the capital that we have in the balance sheet of the firm today.
Yeah.
Got it thanks.
And just as a follow up in the slide deck and in the prepared remarks, you guys highlighted the new branding project that started in <unk> and is expected to run through 2021 can.
Can you just provide some additional detail on kind of what that project entails and what impacts that could potentially have to both revenue revenues and expenses in the near and the long term. Thanks.
Okay. Thank you very much that Sally found the idea is that it's still today.
Have a minority portion of AUM coming from retail being directly through our listed funds that's traded in the stock exchange or FUA locators and distributors, but this is growing over time, if a large number of.
Retail investors exposure to our brand and we never communicated.
Through marketing and branding directly to this public.
And the idea is that we have been developing is exactly how with tap this market in a better way.
Through our branding and marketing approach. It we expect this to be of course.
Our highly accretive in terms of the understanding of our platform and the understanding of our products and service to the retail clients. We did some inside this costs.
We have some.
Kind of.
Interviews and the understanding of how the public view ourselves today in regards to the point that they know not so much of Vinci just on the high level. So we decided to create this project exactly Chu.
Create a deeper understanding of our brand and that we are very confident and we believe that will translate in more revenues in the future.
We believe that that will translate in more AUM coming from just public.
That's the retail investor.
Yeah, and just to complement that this is Bruno again, you you asked the question in regards to the cost. So today. The visibility is for just a few million more in terms of expenses in the next few quarters.
So we had I think 1.5 in the first quarter and it's gonna be a few million more spreads throughout the next few quarters.
Got it thanks guys.
Thank you.
There appear to be no further questions in queue. At this time are there any closing remarks.
Uh Huh, that's Alessandra just would like to thank you all for.
Your patience and attention with us.
We are very happy to.
Delivered as a results of our first quarter as a public company and we expect that we'll be able to deliver.
All the growth that we're expecting going forward, so I'd like to thank you all and <unk>.
Good evening to everybody.
Okay.
This concludes today's conference call. Thank you for participating.
You may now disconnect.
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